For-Profit Education Company to Pay $13 Million to Resolve Cases Alleging Submission of False Claims for Federal Student Aid
BALTIMORE, MD—Education Affiliates (“EA”), a for-profit education company based in White Marsh, Maryland, has agreed to pay $13,000,000 to the United States to resolve allegations that it violated the False Claims Act by submitting false claims to the Department of Education for federal student aid for students enrolled in its programs.
The settlement agreement was announced today by United States Attorney for the District of Maryland Rod J. Rosenstein; Principal Deputy Assistant Attorney General Benjamin Mizer of the U.S. Department of Justice Civil Division; U.S. Under Secretary of Education Ted Mitchell; and Inspector General Kathleen Tighe of the U.S. Department of Education Office of Inspector General; United States Attorney for the Southern District of Texas Kenneth Magidson; United States Attorney for the Northern District of Alabama Joyce White Vance; United States Attorney for the Southern District of Ohio Carter M. Stewart; and United States Attorney for the Middle District of Tennessee David Rivera.
“Students who apply for federal financial aid to attend trade and professional schools are required to show that they have the necessary skills to complete the educational program and work in the field,” said U.S. Attorney Rod J. Rosenstein of the District of Maryland. “This settlement resolves the government’s allegations that Education Affiliates defrauded the government by changing students’ test scores and enrolling students with invalid diploma mill high school ‘diplomas’ ordered online.”
“Today’s settlement is an excellent example of cooperation among multiple offices of the federal government to achieve a result that protects federal student aid funding and the interests of individual students,” said Principal Deputy Assistant Attorney General Benjamin C. Mizer of the Justice Department’s Civil Division. “Schools have an obligation to live up to their commitment to the government and their students when they accept federal student aid funds.”
EA provides post-secondary education training programs in a variety of healthcare and trade professions. EA operates 50 campuses in the states of Maryland, Florida, Texas, Alabama and Ohio under various trade names, including All State Career, Fortis Institute, Fortis College, Tri-State Business Institute Inc., Technical Career Institute Inc., Capps College Inc., Driveco CDL Learning Center, Denver School of Nursing and Saint Paul’s School of Nursing, which provide post-secondary education training programs in several professions in the states of Alabama, Florida, Maryland, Ohio and Texas.
The government alleged that employees at EA’s All State Career campus in Baltimore altered admissions test results so as to admit unqualified students, created false or fraudulent high school diplomas, and falsified students’ federal aid applications, and that multiple EA schools referred prospective students to “diploma mills” to obtain invalid online high school diplomas. These allegations also led to criminal convictions of two All State Careers admission representatives, Barry Sugarman and Jesse Moore, and a test proctor, Jacqueline Caldwell.
“The various cases that were settled here include numerous allegations of predatory conduct that victimized students and bilked taxpayers,” said Under Secretary Ted Mitchell of the U.S. Department of Education. “In particular, the settlement provides for repayment of $1.9 million in liabilities ordered by Secretary of Education Arne Duncan that resulted from EA awarding federal financial aid to students at its Fortis-Miami campus based on invalid high school credentials issued by a diploma mill. Secretary Duncan made clear that such abusive behavior would not be tolerated, and we will continue to work with the Justice Department and other federal agencies to ensure that postsecondary institutions face consequences when they violate the law.”
The settlement agreement also resolves allegations related to EA schools in Birmingham, Alabama, Houston and Cincinnati, including violations of the ban on incentive compensation for enrollment personnel, misrepresentations of graduation and job placement rates, alteration of attendance records and enrollment of unqualified students.
“Using fake high school diplomas is a particularly insidious abuse of the federal student aid system,” said Inspector General Kathleen Tighe of the U.S. Department of Education Office of Inspector General. “Students received only a worthless piece of paper.” Tighe commended the efforts of Office of Inspector General staff and Department of Justice attorneys whose outstanding investigative work led to this significant settlement.
The settlement resolves five lawsuits filed under the whistleblower provisions of the False Claims Act, which permit private citizens to sue on behalf of the United States and share in the recovery. As part of this resolution, the five whistleblowers will receive payments totaling approximately $1.8 million.
The settlements were the result of an investigation by the U.S. Attorney’s Office for the District of Maryland, the Justice Department’s Civil Division, Commercial Litigation Branch, the U.S. Attorney’s Offices for the Southern District of Texas, Northern District of Alabama, Southern District of Ohio, and Middle District of Tennessee, the Department of Education and its Office of Inspector General, and the Federal Bureau of Investigation. Mr. Rosenstein thanked Assistant United States Attorneys Thomas F. Corcoran and Rebecca Koch who handled the Maryland cases.
The cases are captioned United States ex rel. Roman v. All State Career, Inc. and Education Affiliates, Inc., Civil Case No. JKB-10-1730 (D.Md.); United States ex rel. Thomas v. Education Affiliates, Inc., Civil Case No. JKB-14-332 (D.Md.); United States ex rel. Andrews v. Education Affiliates, Inc., et al., Civil Case No. H-13-2366 (S.D. Tex.); United States ex rel. Atkins, et al. v. Fortis Institute and Education Affiliates, LLC, Civil Case No. CV-14-1107-S (N.D. Ala.); and United States ex rel. McArthur, Gruff & Associates LLC v. Education Affiliates, Inc., Civil Case No. 1:14-CV-977 (S.D. Oh.). The False Claims Act claims resolved by the settlement are allegations only and there has been no determination of liability.